Treasury and Resources Department
Ministerial Decision Report
Assignment of a long lease (sale) of the Royal Yacht Al Fresco area by SoJDC
- Purpose of Report
To enable the Assistant Minister to consider approving the request from the States of Jersey Development Company (“SoJDC”) to vary the existing head lease to cover the Al Fresco area of the Royal Yacht Hotel only, assigning the varied lease to a new purchaser for £975,000 and for a new head lease to be put in place for the remainder of Weighbridge Square that was previously in the original head lease before it was varied.
- Background
The Assistant Minister received a letter dated 27th October 2017 from the Finance Director of SoJDC setting out the request relating to the Royal Yacht Al Fresco area.
SoJDC had previously identified in a letter to the Assistant Minister dated 31st May 2016 the desire of the Board to sell various investment properties which sit outside of the Company’s core business and which would be used to support cash-flowing the Company’s core development activities.
P.73/2010: “Property and Infrastructure Regeneration: The States of Jersey Development Company Limited”, in its Appendix 7, sets out the “Protocols for the Transfer of assets to and from the States of Jersey Development Company.”
The principles contained in this state, “The States of Jersey (“SoJ”) is establishing SoJDC as a development company. The prime purpose of SoJDC is to deliver regeneration projects to provide the best socio-economic benefit to SoJ. This will be in the form of enhancing the value of existing properties through refurbishment, the development of new properties, infrastructure and public realm. Regeneration assets may be retained by the Public (SoJ) or disposed of to realise capital proceeds. Property held by either Jersey Property Holdings (“JPH”) or SoJDC will be consolidated within the SoJ accounts.”
Principles to guide policy on holding assets in the future were set out in Section 8 of P.73/2010. This included:-
- “Once developments have been completed, they should be sold in the open market or if there a strategic reason for long-term ownership by the States, transferred to SoJ at market value.
- Where assets are sold into the market, they should be subject to an independent valuation to ensure best value is being achieved.”
Each of the investments held by SoJDC at the time P.73/2010 was approved by the States, were listed in Appendix 5 of P.73/2010 and a strategy for disposal identified. This states that the Weighbridge site should be transferred back to Jersey Property Holdings at market value. The transfer back to the States was proposed as it envisaged the square should remain in public ownership.
The area of land adjacent to the Royal Yacht Hotel has already been let on a long lease to the Royal Yacht Hotel to provide Al Fresco dining facilities and is therefore in private use and not open to the public unless as customers of the hotel. This area of land is separated by a road to the rest of the public square and can be divided off and the lease assigned separately.
- Current request
SoJDC have asked that the Assistant Minister for Treasury & Resources confirm by Ministerial Decision that SoJDC :-
- May vary the head lease for Weighbridge Square to include the Royal yacht Al fresco land only;
- Assign the varied lease to the new purchaser for £975,000;
- Put in place a new head lease between the Public and SoJDC for the remaining land at Weighbridge Square that was previously included in the head lease before it was varied.
SoJDC’s interest in the Weighbridge had an estimated value of £1 million that is reflected in the 2016 Annual Report & Accounts. SoJDC advise that a professional valuation was undertaken as at 31st December 2013 that produced a value of £750,000.
The current rental value is £54,593.51 (£24.78 per sq.ft) and is subject to annual increases in accordance with increases in Jersey RPI. There are also three yearly increases to the higher of the market rent or the increase in line with the Jersey RPI.
In considering the sale SoJDC approached the owners of the Royal Yacht Hotel who declined to purchase the site and instead preferred to extend the term of the lease from 16 years to 41 years. Extending the lease improved the value of the land and ministerial approval was sought and given on January 21st 2017 under delegated authority to the Director of Property Holdings.
The land was marketed by BNP Paribas Real Estate (Jersey) Ltd and attracted four interested parties. Best bids were then sought for which the highest offer was £975,000. Of the four investors who expressed interest only two made bids, one for £900,000 and one for £975,000. A copy of the brochure is attached as Appendix 1.
SoJDC advise that on an income basis, the remaining land at the Weighbridge is worth approximately £250,000 but believe this is misleading given the open land is provided for mainly charitable events where no charge is levied by SoJDC. They note that regenerating the Weighbridge area cost the company just under £1.8 million in 2007 which has significantly improved the quality of the area for the benefit of the public.
SoJDC intend, for valuation purposes in the 2017 financial statements, that the remainder of Weighbridge Square will be disclosed at a value of £250,000 that overall with the land being sold creates a total value of £1.225 million which would create a gain in the 2017 financial statements of £225,000.
Transaction Details
Weighbridge Square is held on a 150 year leasehold from the Public of Jersey from 15th February 2008. SoJDC has subsequently put in place a 41 year lease with the Royal Yacht Hotel that refers to the head Lease. SoJDC propose to vary the existing head lease to the area covered by the Al Fresco area for the Royal Yacht Hotel, assign this to the proposed assignee (for £975,000) and put in place a new head lease to cover the remaining area of Weighbridge Square. SoJDC advise that this proposal has been agreed with Jersey Property Holdings as the simplest and cleanest way to transact.
The SoJDC have agreed that approval be requested for this transaction. The proposed purchaser for the Al Fresco area is a local private investor. SoJDc have notified Treasury of his identity.
- Recommendation
The Assistant Minister is recommended to approve that SOJDC:-
- May vary the head lease for Weighbridge Square to include the Royal Yacht Al Fresco land only;
- Assign the varied lease to the new purchaser for £975,000;
- Put in place a new head lease between the Public and SoJDC for the remaining land at Weighbridge Square that was previously included in the head lease before it was varied.
This is subject to there being no objections after the 15 day “grace” period required under P.73/2010 in order to allow for sufficient transparency and scrutiny.
- Reason for Decision
The Assistant Minister’s approval is in accordance with section 13.1 of SoJDC’s Memorandum of Understanding and the requirements in Section 12 of P.73/2010.
In accordance with the desire of the SoJDC Board to sell various investment properties which sit outside of the Company’s core business and which would be used to support cash-flowing the Company’s core development activities.
- Resource Implications
There are no financial consequences for the States of Jersey.
Report author : Head of Shareholder Relations | Document date: 3rd January 2018 |
Quality Assurance / Review : Head of Decision Support | File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DS, WR and SD\2018-0004 - Assignment of a long lease (sale) of the Royal Yacht Al Fresco area by SoJDC |
MD sponsor : Director of Treasury Operations & Investments |
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